"The fact is, no one spends $1.85 billion studying something," an Office of Management and Budget official told Breaking Defense — a blunt articulation of an administration argument that reconciliation money now sought by the Pentagon could be used to buy the first U.S. Navy ships built in Japan or South Korea.
OMB official: $1.85 billion for studies and possible procurement
The Pentagon has requested $1.85 billion in mandatory Navy research and development funds be included in an upcoming reconciliation bill for “two separate study and procurement efforts” to assess allied shipbuilders’ ability to construct future cruisers, destroyers and frigates, according to an overview of the request. An OMB official told Breaking Defense that the funds are not solely for analysis and that “the OMB director has made that clear, I’m making it clear. We’re here to seriously look at procuring assets sooner rather than later.”
The official said that in the case of frigates, the full amount could “purchase an entire frigate, depending on who the manufacturer is,” and that destroyer or cruiser costs in Japan and Korea can average about $1 billion, making foreign construction plausible within the $1.85 billion figure. The official framed the proposal as a way to “add competition and capacity in the United States” by leveraging lower-cost production abroad while requiring foreign builders to invest and produce domestically over time.
How the administration frames the “Finland model” precedent
The OMB official pointed to prior deals the administration has used as a template: agreements with Finland for arctic security cutters (ASCs). Under those arrangements, Rauma Marine Constructions will build two ASCs in Finland while establishing U.S. production with Bollinger Shipyards in Louisiana to build the next four. Davie Defense and Helsinki Shipyards have a parallel arrangement for additional ASCs, with some vessels to be built domestically. The official described that outcome as the “Finland model.”
Applied to surface combatants, OMB envisions the hull, mechanical and electrical (HM&E) structures for perhaps one or two initial ships being produced in Japan or South Korea, with U.S. defense contractors leading combat-systems integration and the foreign parent companies making contractual investments in U.S. brownfield or greenfield yards.
Congressional reactions: Kaine, Wicker, King, Golden and committee staff
Lawmakers voiced a range of reactions. Sen. Tim Kaine said he agrees with OMB director Russ Vought’s message to shipbuilders about accountability but cautioned that international shipbuilders’ roles should be limited and that the U.S. should maximize domestic capacity. SASC Chairman Roger Wicker said he hopes the U.S. would not have to “go that route” but agreed the Navy is not getting ships fast enough. Sen. Angus King called the idea of building destroyers in Japan and Korea “the worst idea since the Red Sox traded Babe Ruth.”
Rep. Jared Golden has announced plans for an amendment to the NDAA that would ban using funds to produce U.S. warships, or parts for those vessels, outside the United States; the House Armed Services Committee was scheduled to mark up the NDAA on June 4. HASC’s draft NDAA would allow the Navy to purchase 12 used, foreign-made vessels using the National Defense Sealift Fund but does not authorize new foreign-made surface combatants.
Committee staffers and a senior majority staffer told reporters that “current law prohibits the building of a US naval ship in a foreign shipyard,” and they have not received a legislative proposal detailing how the administration would spend the $1.85 billion if included in reconciliation.
Legal and logistical hurdles: Eric Labs, US Code 8679, and integration challenges
Eric Labs of the Congressional Budget Office told Breaking Defense that if warships were to be built in foreign yards using discretionary appropriations, Congress would have to change the law that bars foreign construction. For ships funded through reconciliation, Labs said the president could issue a waiver of U.S. Code 8679 — a route previously used for the icebreaker deals with Finland — if justified on national security grounds.
But introducing foreign-built designs into the fleet raises logistical costs. Labs said selecting a Korean design “essentially poses the same hurdles as introducing a new class of ship,” requiring training facilities and maintenance infrastructure because the vessels “won’t be exactly the same.” Bradley Martin of RAND (and retired Navy captain) said he did not expect layoffs at U.S. yards because purchases would be “additive” rather than strictly substitutive.
What this means for U.S. shipbuilders, Hanwha/HD Hyundai/Samsung/Mitsubishi/Kawasaki/JMU, and Congress
- U.S. shipbuilders and legacy primes: The OMB official acknowledged resistance from established shipbuilders and noted efforts to engage additional regions (Great Lakes, Mississippi River, Ohio River Valley) for module construction. Congressional concern centers on supply-chain impacts and layoffs, with staffers warning that buying abroad “hurts the primes … and their subcontractors.”
- South Korean and Japanese shipbuilders: The administration is engaged in talks with Hanwha, HD Hyundai, Samsung Heavy Industries, Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Japan Marine United, and the official highlighted their adoption of modernization and robotics. JMU has laid keels for two Aegis System Equipped Vessels and plans deliveries in 2028 and 2029 — an example cited to contrast faster foreign program timelines with U.S. delays.
- Congress and policy makers: Expect legislative action. Golden’s amendment is pending, committee staff note legal prohibitions, and lawmakers from both parties have voiced skepticism or conditional support — leaving the path forward dependent on whether reconciliation language, congressional waivers, or executive authorities are used.
The next concrete milestones are procedural and legal: the House Armed Services Committee markup on June 4, ongoing discussions between the administration and foreign builders, and possible invocation of a waiver under U.S. Code 8679. The $1.85 billion figure sits at the center of a test over whether reconciliation funds will be used to open a faster, but politically fraught, avenue to buy and then domestically anchor ships produced initially overseas.
